Foreign car brands struggle in Japan

TOKYO: Spotting a foreign car on Japanese streets is a rare sight—save for the odd luxury brand like Ferrari or Bentley—a point underscored at the ongoing Tokyo Motor Show.

It is now the third time that major US carmakers, including General Motors and Ford, have skipped the show, which is held every two years and which kicked off last week. Sources said their puny presence gives them little incentive to spend time and money trying to crack the world’s third-largest car market.

While Japanese brands such as Toyota and Nissan enjoy huge success in China and the US, the world’s top two car markets, overseas names that also include Renault, Peugeot-Citroen and their South Korean rivals accounted for just 4.5 percent of the 5.37 million vehicles sold in Japan last year. Some critics pin the imbalance on non-tariff barriers they said effectively shut foreign carmakers out of the market—a key issue in ongoing free-trade talks.

Others counter that most overseas brands offer few models and have failed to come up with cars that Japanese drivers want to buy. Among the exceptions are Mercedes-Benz, BMW, Volkswagen and Volvo, but even their sales are a small fraction of the market.

Light vehicles known as kei cars, which have engines sized 660cc or less, account for about one-third of sales in Japan, a category almost non-existent among US and European manufacturers.

Frederic Bourene, head of Japanese marketing for France’s Renault, chalked up the challenge to the dominance of Japan’s domestic manufacturers with their well-established supply chains and thousands of dealerships.

“The Japanese market is highly competitive,” Bourene said on the sidelines of the motor show. “There are eight domestic manufacturers that already have plants here and don’t need to import with the logistical issues and time that goes with that.”

Renault, which owns more than 40 percent of Nissan, has doubled its sales in Japan over the past four years, but it still expects to sell just 3,600 vehicles in 2013.

“Between the logistics costs and the exchange rate, foreign brands are about 20 percent more expensive than Japanese cars in the same range,” Bourene added.

Still, foreign carmakers have long complained that Japanese authorities erect huge barriers to entry into the lucrative market. Those walls include requiring firms to change the headlights on Japan-bound cars or install extra and costly electronics, they said.

That is a key hurdle in trade talks between the European Union and Japan, as well as separate negotiations involving Tokyo and Washington, which is leading the charge for the mooted Trans-Pacific Partnership . The proposed trade pact’s dozen members account for about 40 percent of the world’s economy.

General Motors, which last year was overtaken by Toyota as the world’s biggest carmaker, has just 34 dealerships in Japan for its Cadillac and Chevrolet brands—and sold only around 1,000 cars there last year—versus 4,700 locations for its Japanese rival.

Ford boss Alan Mulally has accused Tokyo of manipulating the yen’s sharp decline over the past year to gain another trade advantage.

German carmakers and Sweden’s Volvo have done better in Japan, accounting for about three-quarters of the foreign cars sold in the country. Volkswagen, the world’s third-biggest producer, expects to sell 60,000 vehicles in Japan this year.

Satoshi Hoshikawa, a spokesman for BMW, said the firm sold 40,000 cars in Japan last year.